Immigrants bring changes to housing industry.

The United States is experiencing the largest wave of immigration in its history. To understand how this wave will affect the housing industry, Jim Carr of Fannie Mae's Office of Housing Research initiated the Immigration Research Project. In the first report from this project, Pat Simmons and Isaac Megbolugbe examine immigration trends and characteristics of recent immigrants. While the initial report focuses primarily on homeownership, there are significant implications for rental housing as well.

Immigration Levels

According to Immigration and Naturalization Service figures published in the report, the United States admitted about 900,000 legal immigrants in fiscal year 1993. Not counting undocumented immigrants who were recently legalized under the Immigration Reform and Control Act, legal immigration in 1993 was at the highest level in almost 80 years. If we add undocumented immigrants to legal immigrants, the total is more than 1.1 million per year. That figure is roughly equal to the immigration experienced in this country during the peak years of the first and second decades of the century.

The chart on page 32 shows total immigration, both legal and illegal, by decade between 1890 and the year 2000. The wide fluctuations result from changes in U.S. immigration policies as well as national and global economic and political conditions -- factors which are clearly difficult to predict. However, if immigration continues at its current pace, about 11 million people will arrive in the United States during the 1990s, a total exceeding any previous decade.

Immigrant Origins and Destinations

The global origin of our immigrants has changed substantially over time. Between 1820 and 1960, 80% of the immigrants to the United States came from Europe. In 1965, however, the Immigration and Nationality Act Amendments repealed national origin quotas that had previously favored immigration from Europe. The lifting of the quotas has resulted in a significant increase in immigration from Latin America and Asia. In the 1950s, for example, only about one-third of legal immigrants came from Asia and Latin America. By the 1980s, these areas contributed more than 80% of legal immigrants. Conversely, arrivals from Europe and Canada declined from two-thirds of legal immigrants in the 1950s to only 15% in the 1980s.

Once in the United States, most immigrants settle in just a few states. In 1990, five states -- California, New York, New Jersey, Texas and Florida -- were home to 70% of all immigrants who arrived during the 1980s. By comparison, only 34% of the U.S. population lived in these five states during the same year. California alone accounted for 36% of 1980s immigrants -- more than three times its share of the total U.S. population.

Recent Immigrants

A large majority of recent immigrants occupy rental housing for some time after first arriving though, as one might expect, homeownership rates tend to increase rapidly with the length of time immigrants spend in the United States. In 1990, there were 2.3 million households headed by immigrants who had entered the United States during the preceding decade. Of these households, 1.8 million, or 77% were renters. Among those households headed by immigrants who arrived as recently as 1987 or later, an even greater percentage, 87%, were renters.

It also is interesting to note that recent immigrants have a strong tendency to live in multifamily structures, whether rental or not. For those immigrant householders who entered the United States in 1987 or later, 55% lived in structures with five or more units and 13% lived in buildings with 50 or more units. Part of this statistic is likely explained by the geographic concentration of recent immigrant households in larger metropolitan areas, such as New York and Los Angeles, where this type of housing is more prevalent than in the nation as a whole. It may also be that, in these areas, rents affordable to immigrants are more concentrated in these types of buildings. Studies cited in the report indicate that recent immigrants who are renting tend to occupy multifamily rental structures, particularly structures with 10 or more units, at higher rates than native renters. Over 40% of renter households headed by 1980s immigrants lived in structures with 10 or more units. By comparison, less than 30% of native renters occupied such structures.

Conclusions

These immigration trends are likely to have a number of impacts on rental housing in the United States -- some subtle, some obvious, some positive and some problematic.

Certainly, the concentrations of immigrants in certain gateway states will have a disproportionate impact on rental housing in these states. Owners and managers of all rental housing in these areas, and especially of rental housing in structures with over 10 units, would be well advised to assure that they are both taking advantage of the opportunities presented by these new renters and facing the difficulties that they may present.

Simpler issues for owners and managers will include finding outreach methods which focus on reaching and attracting recent immigrants. Many immigrants will be skilled workers with some financial resources; they certainly will not be exclusively those lacking such means. Outreach may even include creative methods for supporting a new immigrant's goals of homeownership; coops and condos may look to these new immigrants as well. There is some word on the street that new immigrants, because of financial constraints or because of what they were used to in their countries of origin, have been supporting a market of smaller condo units which were not selling well to prospective nativeborn home buyers.

It is possible, too, that new immigrants could stabilize central city rental markets in the gateway states. The Los Angeles rental market has been supported by immigration, for example, while many cities in the Midwest, less affected by recent immigration, haven't benefitted from this support and have dramatically lost population.

More complex issues also will arrive with increasing immigrant populations, especially with a broader range of countries of origin. Racial, religious or ethnic issues might arise between native tenants and immigrants and between various immigrant populations who will bring with them their own history and attitudes. Ethnic "tipping" issues will arise and may replace, or further complicate, the racial "tipping" issues of prior years. Managing properties with multiracial and multiethnic populations will require special sensitivities and skills. Federal immigrant policies and the attitudes, sensitivity and support of state and local governments in gateway areas will affect how smoothly this surge of immigration becomes an accepted part of the American profile.

While immigration is expected to disproportionately affect the gateway states, it would seem likely that immigrants will be making up a higher percentage of both renters and homeowners in many areas. Owners and managers in many markets might expect a future which includes increased tenancy from new immigrants perhaps for decades to come.

The need to capture the new immigrant market will be especially crucial during times when demographics in the United States result in downtrends in renters from the native population. One of those times is now. As the baby boom generation is replaced by the much smaller baby bust in the age groups most likely to rent, there will be a reduction in the number of new native households entering the rental market. With any economic recession, the renter population is further decreased with adult children returning home. We must look to the new immigrant populations to replace these traditional renters. Owners and managers who know this market best will be in the best shape as we enter the new century.